Boeing got a lot, but it isn't alone

Chicago has given billion in incentives

May 13, 2001|By Gary Washburn, Tribune staff reporter.

New figures show that the city's $21 million incentive package to lure Boeing to Chicago is small change for Mayor Richard Daley, whose administration has now doled out more than $1 billion to woo or nurture business and promote new development.

Because a list of big cities and many smaller ones now offers financial incentives to attract businesses, the old debate over whether such strategy is appropriate seems to have faded.

But as the city increasingly gets into the business of funding businesses, debates roil over whether the money is dished out equitably. Is too much money being pooled in the Loop? Do new businesses that get money have an unfair advantage over old ones that don't?

And while most everyone accepts that the investments can yield healthy returns for the city, disagreement remains on how much benefit the grants and loans ultimately create.

Since a landmark economic development agreement with Nabisco in 1994, City Hall has agreed to provide more than $980 million in grants and bargain-rate loans to businesses and developers, according to city records. On top of that, the city has pledged the $21 million to Boeing, mostly in the form of property tax reduction.

That doesn't count millions of dollars of added incentives provided through other programs.

Numerous companies, for example, have received property tax breaks in return for building or expanding their commercial and industrial operations. Home builders have taken city-owned land at drastically discounted prices after agreeing to construct moderate-cost single-family houses. And some companies have received money to help cover the cost of spiffing up the exteriors of their buildings while others have been exempted from payment of sales taxes on materials used to construct new factories.

Some grant money has gone to non-profit institutions, but even those projects include business components. For example the new Goodman Theatre complex in the Loop, which received $18.8 million, includes commercial space.

Even as Boeing's top executives last week mulled whether to locate in Chicago, Dallas or Denver, the Daley administration was working on another deal, extending a hand to a local company that does much more humble work than building jets.

Under a new mayoral proposal, homegrown American Linen would receive a $3.5 million grant to build a new 150,000-square-foot, $25 million commercial laundry in Pilsen, promising to add 70 jobs to the 200 it will move from its present Near North Side quarters.

It's about jobs, growth

Officials say such seed money has unleashed hundreds of millions' worth of private investment. It's all about jobs and economic growth and offsetting the inevitable losses of companies like Brach's and Ward's, according to Daley.

"[Daley] has been very aggressive, and I think it shows," said David Schulz, director of Northwestern University's Infrastructure Technology Institute, who served in the administrations of former Mayors Jane Byrne and Harold Washington. "The proof of that at the end of the day is that the population went up. If there weren't jobs, there wouldn't be the people."

However, some say there is no way to measure how many of the grantees would have located or expanded in Chicago without taxpayer assistance, particularly in the central area. Nor is it known how much the subsidies provided to one company may have hurt a competitor.

"I think the mayor has just gone over the edge in terms of giving things away and, in effect, directing development to suit his own purposes as opposed to letting the market operate efficiently," said Charles Gardner, retired head of Chicago Dock and Canal Trust, developer of 60 acres of prime property in the Streeterville area.

"We got no subsidies and, in fact, had an obligation to build our own streets, sidewalks and riverwalk while our competitors, particularly in the Loop, already had the infrastructure in place and got money to build buildings to compete with us," Gardner said.

The lion's share of corporate assistance provided or in the pipeline, roughly $525 million since 1994, has come in as grants in special economic development zones known as tax increment financing (TIF) districts.

Chicago had only eight TIF districts before Daley's election, according to an analysis by the Neighborhood Capital Budget Group, a non-profit community-based organization.

Now there are more than 100, and the number continues to grow as Daley seizes upon what he contends--in a bit of overstatement--is the only tool he has to stimulate economic development.

A city-sponsored study in 1998 found that TIF grants had made possible 3.7 million square feet of new office space; 1.2 million square feet of new retail space; 1.7 million square feet of new or rehabilitated industrial space; and 1,100 new residential units.

Researchers concluded that the companies and developers receiving the grants had invested $6.30 for every dollar of public money they got.